Question 1

In which year were all tariffs between NAFTA members eliminated?

Accepted Answer

A)  2008 
B)  2011 
C)  2009 
D)  2010 
A)  2008 
B)  2011 
C)  2009 
D)  2010 A

Question 2

Which of the following is the least likely to be the result of the formation of a trading bloc?

Accepted Answer

A)  Larger markets for domestic companies 
B)  Greater specialisation among member countries 
C)  More scope for member countries to develop economies of scale 
D)  New export markets for less developed countries 
A)  Larger markets for domestic companies 
B)  Greater specialisation among member countries 
C)  More scope for member countries to develop economies of scale 
D)  New export markets for less developed countries D

Question 3

The European Economic Area is a

Accepted Answer

A)  common market. 
B)  single market. 
C)  customs union. 
D)  free trade area. 
A)  common market. 
B)  single market. 
C)  customs union. 
D)  free trade area. C

Question 4

What are some of the possible disadvantages of a customs union?

Accepted Answer

• The free movement of capital and labou

Question 5

Why may a single market cause adverse regional effects?

Accepted Answer

Firms are likely to locate as near as po

Question 6

Assume that, before it joined the EU, the UK had to pay a tariff on Granny Smith apples imported from France. The UK grows both Coxes apples and Granny Smith apples but it is France that has a comparative advantage in the latter. When the UK joined the EU, one would have expected to see the UK

Accepted Answer

A)  increase its imports and reduce its production of Granny Smiths. 
B)  reduce its imports and increase its production of Granny Smiths. 
C)  increase its exports of Granny Smiths and reduce its imports of Coxes. 
D)  reduce its exports of Granny Smiths and increase its imports of Coxes. 
A)  increase its imports and reduce its production of Granny Smiths. 
B)  reduce its imports and increase its production of Granny Smiths. 
C)  increase its exports of Granny Smiths and reduce its imports of Coxes. 
D)  reduce its exports of Granny Smiths and increase its imports of Coxes.

Question 7

Which of the following was not a prime aim of the EEC on its foundation?

Accepted Answer

A)  To allow greater economies of scale to be gained in production and consumption 
B)  To avoid another war by uniting countries within Europe 
C)  To provide effective competition against the economic giant of the US 
D)  To bring a greater awareness of the different cultures of the member countries and to foster cultural and educational links between them 
A)  To allow greater economies of scale to be gained in production and consumption 
B)  To avoid another war by uniting countries within Europe 
C)  To provide effective competition against the economic giant of the US 
D)  To bring a greater awareness of the different cultures of the member countries and to foster cultural and educational links between them

Question 8

A common market is when countries operate together having free movement of labour and capital and similar trade laws.

Accepted Answer

A) True 
 B)False

Question 9

Name as many of the EU member states as you can.

Accepted Answer

1) Austria
2) Belgium
3) Bulgaria
4) Cro

Question 10

What is the significance of NAFTA (North American Free Trade Agreement)?

Accepted Answer

After the EU, NAFTA is the largest tradi

Question 11

If increased economic integration causes more co- operation between firms, this could cause

Accepted Answer

A)  more elastic demand curves. 
B)  greater oligopolistic collusion. 
C)  industry output to rise. 
D)  consumer surplus to rise. 
A)  more elastic demand curves. 
B)  greater oligopolistic collusion. 
C)  industry output to rise. 
D)  consumer surplus to rise.

Question 12

A customs union is more likely to lead to trade diversion rather than trade creation when the union's external tariff is very_______ and there is ________between goods produced within and outside the union.

Accepted Answer

A)  high; no cost difference 
B)  low; a substantial cost difference 
C)  high; a substantial cost difference 
D)  low; no cost difference 
A)  high; no cost difference 
B)  low; a substantial cost difference 
C)  high; a substantial cost difference 
D)  low; no cost difference

Question 13

NAFTA is a_______, whereas the EU is a _______________.

Accepted Answer

A)  free trade area; single market 
B)  free trade area; customs union 
C)  common market; single market 
D)  common market; customs union 
A)  free trade area; single market 
B)  free trade area; customs union 
C)  common market; single market 
D)  common market; customs union

Question 14

The act signed in 1992 to establish a true common market of countries in Europe was called the

Accepted Answer

A)  European Union Act. 
B)  Single European Act. 
C)  European Community Act. 
D)  Single Market Act. 
A)  European Union Act. 
B)  Single European Act. 
C)  European Community Act. 
D)  Single Market Act.

Question 15

Which of the following is a barrier to trade, as viewed by the European Council?

Accepted Answer

A)  Introduction of country- specific technical standards 
B)  Total transport cost being higher when long distances are involved 
C)  Language barriers 
D)  Consumers preferring locally produced products 
A)  Introduction of country- specific technical standards 
B)  Total transport cost being higher when long distances are involved 
C)  Language barriers 
D)  Consumers preferring locally produced products

Question 16

The purpose of the North American Free Trade Association (NAFTA) is to

Accepted Answer

A)  speed up the transfer of technology between the US, Canada and Mexico. 
B)  reduce trade barriers between the US, Canada and Mexico. 
C)  reduce the amount the US imports from Canada and Mexico. 
D)  reduce the US's dependency on imported oil. 
A)  speed up the transfer of technology between the US, Canada and Mexico. 
B)  reduce trade barriers between the US, Canada and Mexico. 
C)  reduce the amount the US imports from Canada and Mexico. 
D)  reduce the US's dependency on imported oil.

Question 17

Increased competition between member states of the EU should lead to increases in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 18

The existing members of the EU are likely to benefit more than the new entrants to the EU.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is estimated to yield the greatest monetary benefit to the European Union when trade barriers are removed?

Accepted Answer

A)  The reaping of economies of scale by industries 
B)  Removal of all industrial barriers 
C)  Cessation of national procurement policies by government 
D)  Removal of frontier formalities 
A)  The reaping of economies of scale by industries 
B)  Removal of all industrial barriers 
C)  Cessation of national procurement policies by government 
D)  Removal of frontier formalities

Question 20

Assume that, before it joined the EU, UK consumers had to pay a tariff on imported Fiat cars. The UK's main small car at the time was the Mini. Italy had a comparative advantage in the production of small cars. On joining the EU, the UK car market would have seen

Accepted Answer

A)  trade reduction. 
B)  trade diversion. 
C)  trade division. 
D)  trade creation. 
A)  trade reduction. 
B)  trade diversion. 
C)  trade division. 
D)  trade creation.

Exam 25: Trading Blocs

In which year were all tariffs between NAFTA members eliminated?

Which of the following is the least likely to be the result of the formation of a trading bloc?

The European Economic Area is a

What are some of the possible disadvantages of a customs union?

Why may a single market cause adverse regional effects?

Assume that, before it joined the EU, the UK had to pay a tariff on Granny Smith apples imported from France. The UK grows both Coxes apples and Granny Smith apples but it is France that has a comparative advantage in the latter. When the UK joined the EU, one would have expected to see the UK

Which of the following was not a prime aim of the EEC on its foundation?

A common market is when countries operate together having free movement of labour and capital and similar trade laws.

Name as many of the EU member states as you can.

What is the significance of NAFTA (North American Free Trade Agreement)?

If increased economic integration causes more co- operation between firms, this could cause

A customs union is more likely to lead to trade diversion rather than trade creation when the union's external tariff is very_______ and there is ________between goods produced within and outside the union.

NAFTA is a_______, whereas the EU is a _______________.

The act signed in 1992 to establish a true common market of countries in Europe was called the

Which of the following is a barrier to trade, as viewed by the European Council?

The purpose of the North American Free Trade Association (NAFTA) is to

Increased competition between member states of the EU should lead to increases in consumer surplus.

The existing members of the EU are likely to benefit more than the new entrants to the EU.

Which of the following is estimated to yield the greatest monetary benefit to the European Union when trade barriers are removed?

Assume that, before it joined the EU, UK consumers had to pay a tariff on imported Fiat cars. The UK's main small car at the time was the Mini. Italy had a comparative advantage in the production of small cars. On joining the EU, the UK car market would have seen

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A customs union is more likely to lead to trade diversion rather than trade creation when the union's external tariff is very_ and there is __between goods produced within and outside the union.

NAFTA is a_, whereas the EU is a _________.